Supply Chain Management-A Case of Small Supplier, Big Volume Time Context Based on a discussion between Jack Smith; the purchasing manager Success Inc and Jill Turner it is not very clear the exact date when the case came up. However, one can tell that Success Inc has an urgent demand for some components required to produce some new products; X and Y. As the case draws to an end, we learn that Success Inc is able to get a reliable supplier to replace ABC GmbH. Therefore the whole case is set out within a period about one year since when Success Inc began to source for a supplier to the time when got a reliable supplier.
Point of View This case is presented from the point of view of Jill Turner who is the business analyst of suppliers at Success Inc (Ostring 29). Jill asserts that she ought to know a lot about suppliers. Furthermore, Jill wonders how much others in the company know about the suppliers. From her view point, their president of Success Inc only had good relations with some suppliers while the vice-president had created upper-level connections with suppliers.
On the other hand, quality managers knew the precise quality of components from different while purchasing managers understood the relationship with supplier and their contracts. On his part, risk manager is involved in establishing the level of risks in companies operations and managing these risks. Success Inc is planning to develop new products X and Y which are expected to be the main products of the company (Ostring, 32). The research and development at Success Inc have identified ABC GmbH as the best supplier for the components required in the venture.
Nevertheless, despite the organizational at Success Inc, the company is faced with problems as it sources for the components. This analysis will focus on the hurdles faced by success Inc before the identifying the best supplier for the components. Central Problem The main problem facing Success Inc is finding a supplier who can provide the components for the development of their new products X which is described as the main product for the company in future. The R&D department has identified ABC GmbH stocks the best quality components.
However, ABC GmbH does not have the required investment to order for the production line and it has to be financed by Success Inc. The required investment figure given by ABC GmbH rises by five times after Success Inc completes negotiations and this raises doubts as to whether the supplier needed resources to finance its investment rather than supplying the production lines. Success Inc ends up losing a lot of finances and time in the deal. Objectives Success Inc lost a lot of resources in sourcing a supplier who stocks the best quality components.
The R&D department at the company asserts that the desired components of the best quality can only be supplied by ABC GmbH. Consequently, Success Inc goes ahead to finance investments of this supplier which leads to lose of resources. The objective of the case is therefore intended for other organizations to avoid costly mistakes as those made by Success Inc. SWOT Analysis Every business organization is influenced by both internal and external factors. It is therefore critical for companies to carry out a SWOT analysis.
A SWOT analysis is an evaluation of the industry within which a company operates and involves an assessment of the company’s strengths. Moreover, a company has to evaluate it weakness, opportunities and threats to its operations. After a SWOT analysis a company should enhance its strengths and take advantage of the opportunities in the market. The company should develop strategies to deal with the threats it faces which can be from suppliers, substitute products or entrants. The company weakness is its loopholes and should be sealed after a SWOT analysis. Strengths of Success Inc The greatest strength of the company is its management.
Management at Success Inc is defined well with the roles and responsibilities of different managers clearly outlined. The risk managers should evaluate the risks facing the organization and develop strategies to deal with these risks. The business analyst is expected to understand all the suppliers in the industry after which she can advice the company accordingly. Moreover the company has quality managers who know the exact quality of supplies from different companies. The purchasing managers should know the relationship between the suppliers and the contracts.
Consequently the company can effectively carry out an industry before undertaking any venture. Weakness of Success Inc The weakness identified at Success Inc includes that the company president and vice president have formed relationship with suppliers which can compromise business analyst decision when sourcing for a supplier as she will be under pressure to serve the interests of the company heads. Moreover, although the responsibilities of different workers have been well defined, their work is compromised by decision of other departments.
In the case study, although the quality department and the business department have the responsibility of sourcing for the supplier, R&D has already indicated that components from ABC GmbH are the best. Furthermore, although the risk manager is required to assess the risks facing the company and recommend ways of dealing with this problem, the manager was not involved in the negotiations with ABC GmbH. This indicates that there is no coordination at Success Inc. Opportunities for the Company The first opportunity available for the company is development of a new product which will increase the company’s profitability.
In addition the company has an opportunity of getting components from different since there are different suppliers in the market. Success Inc could have compared products from Elite company and those offered by ABC. Moreover we learn that finally the company purchased products from a third supplier after being short changed by ABC. Consequently, with many suppliers in the market; the customer has a higher bargaining power. The company must maximize on these opportunities to ensure profitability. Threats of Success Inc Companies face threats of new entrants into the industry, substitute products and loss of the customers.
In the Case of Success Inc, the company faces a threat of suppliers not supplying the required components in the right quantity and in a timely manner. This would affect the quality of products produced by the company and the ability of the company to meet the demand of the customers thereby affecting the company’s profitability. Alternative Courses of Action (ACA) Success Inc undertook to implement a new project to develop a new product X which is to become the company’s main product in future.
R&D department at the company recommended that supplies from ABC GmbH are of the best quality in developing a new product. Since the supplier does not have the required resources to order for the production line; Success Inc has to finance them. However the figure quoted keeps rising as shown in the graph below as negotiations progress. Graph showing changes in amount required by ABC GmbH The supplier alters the figure since they know it is too late for Success Inc to back off from the deal.
However there are three different alternative courses of action available to by Success Inc: ACA 1: Success Inc can get supplies from Elite Ltd which is in good financial condition and would not have required financing from the company. This would however require change of attitude of the sales team at Elite Ltd. ACA 2: Success Inc could have floated a tender for different suppliers in the market to quote their prices and terms of sale and from whom the seller offering the best terms is selected. ACA 3: The management at success Inc can work as a team to identify possible suppliers in the market and analyze the most suitable supplier without relying on the recommendations of the R&D department alone.
Decision Advantages Disadvantages Order supplies from Elite Ltd This would reduce the risks of Success Inc having to finance the operations of another company The R&D department will be unhappy since they will feel that their recommendations have been ignored. Moreover, the company may not get the best quality products since ABC has been identified as stocking the best components for the product Procure components through tendering process This gives Success Inc a vast variety of options to choose from therefore they can choose from the company that has the best terms of sales and prices The process of tendering and analyzing different suppliers is time consuming Success Inc management should work as a team to evaluate the suppliers in the market This will reduce the risks associated during the process of procurement as each member of the team will evaluate the suppliers and therefore the choice will be by consensus The process may be time consuming since the time will have to come to consensus Final Decision All the managers at Success Inc must play their role in sourcing for the supplier.
Detailed Action Plan Success Inc should strengthen team work to ensure that all the managers should play their specific roles when sourcing for suppliers. This will allow the team to choose the best supplier in the market offering the best terms of sale. Work cited Ostring, Pirkko. ‘‘Profit-Focused Supplier Management; How to Identify Risks and Recognize Opportunities’’.
AMACOM (2004). Print